A woman used a computer at a public library to access the Affordable Care Act website. Losses attributed to health plans offered under the health care law may force UnitedHealth to cease participating in the program.

By Zachary Tracer
Bloomberg News
November 20, 2015

WASHINGTON —The biggest US health insurer is considering pulling out of the Affordable Care Act as it loses hundreds of millions of dollars on the program, casting a pall over President Obama’s signature domestic policy achievement.

UnitedHealth Group has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act in 11 more states next year, bringing its total to 34.

The company also cut its 2015 earnings forecast.

Advertisement

While millions of Americans have gained coverage under the law since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth’s case they haven’t been the most profitable. Customers the company has added have tended to use more medical care.

Get Talking Points in your inbox:

An afternoon recap of the day’s most important business news, delivered weekdays.

UnitedHealth is a small player on the Massachusetts insurance exchange. Fewer than 500 people on the exchange, called the Health Connector, have UnitedHealth plans. That’s about 1 percent of the 46,000 people who buy insurance on the Connector and do not receive subsidies to help defray the costs.

UnitedHealth, which just began selling policies through the Connector this year, offers about a half-dozen of the 84 plans available to consumers through the state exchange.

UnitedHealth said it expects as much as $500 million in losses on the health law plans in 2016. The insurer will record $275 million of the costs in the fourth quarter. United said Thursday it’s booking $350 million in losses tied to the ACA plans’ 2015 performance of its ACA plans.

The company’s shares fell 5.6 percent to $110.63 at the close in New York. Anthem Inc. and Aetna Inc., the two biggest health insurers after UnitedHealth, also declined, as did hospital stocks including HCA Holdings Inc. and Community Health Systems Inc.

Insurance markets rely on premiums paid by healthy people to subsidize the medical costs of the sick. If an insurer sets premiums that are too low or attracts customers that are too sick, it can suffer losses. That can be a particular risk in new markets with which an insurer may not be as familiar.

While UnitedHealth has been slower than some of its rivals to sell policies under the act, the announcement may indicate that other insurers are struggling, said Sheryl Skolnick, an analyst at Mizuho Securities.

Advertisement

“If one of the largest and presumably, by reputation and experience, the most sophisticated of the health plans out there can’t make money on the exchanges, then one has to question whether the exchange as an institution is a viable enterprise,” Skolnick said.

‘We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.’

Stephen Hemsley, UnitedHealth chief executive

The Obama administration pointed out that many people are signing up for Affordable Care Act policies. About 1.1 million people have signed up for coverage in the first two weeks of enrollment this year, which began on Nov. 1. That’s a faster pace than last year, though the second week of sign-ups in 2014 included the Thanksgiving holiday week.

“The reality is we continue to see more people signing up for health insurance and more issuers entering the marketplaces,” Ben Wakana, a spokesman for the Department of Health and Human Services, said by e-mail. “Today’s statement by one issuer is not indicative of the marketplace’s strength and viability.” UnitedHealth said it suspended marketing of its individual exchange plans and is cutting or eliminating commissions for brokers who sell the coverage in many markets.

UnitedHealth covers fewer than 550,000 people on the exchanges. About 9.9 million people had insurance through the US- and state-run insurance markets as of June 30.

Anthem and Aetna have said they’ll be patient as the exchange business develops, and that they expect it to eventually become profitable. Aetna has about 1.1 million individual exchange members and Anthem has 824,000.

“It’s way too early to call it quits on the ACA and on the exchanges,” Aetna chief executive Mark Bertolini said on an Oct. 29 conference call. “We view it still as a big opportunity for the company.”

Still, Bertolini said the market “remains challenging,” and Aetna reduced the number of states where it sells coverage to 15 for next year from 17. Cynthia Michener, an Aetna spokeswoman, declined to comment Thursday.

Priyanka Dayal McCluskey of the Globe staff contributed to this report.